Amway: The Untold Story

The Tools Scam

[NOTE: This article was compiled before the uncovering
of 1) Amway's own admissions that the "tools" business is illegal and unethical,
and 2) lawsuits filed by high-level distributors in which they admit that
the majority of their income is made from the sale of tools and not from
Amway products. That information can be found in the Directly
Speaking article and in the lawsuits section, particularly the Hart,
Morrison and Setzer
suits.]

A frequent topic of debate regarding Amway are
the "tools"--tapes, books and rallies--that Dexter Yager, Bill Britt and
leaders of other Amway distributor groups move through their downlines.
Amway distributors generally claim that 1) neither Britt, Yager, nor anyone
else makes any significant amount of money from the sale of these tools,
or 2) that they do make a lot of money from the sale of tools, but that
the tools are absolutely necessary to achieve success in Amway.

There are a number of pieces of evidence that have convinced me that
Yager and Britt and others are making the bulk of their money selling tools
rather than Amway products.

* Dexter Yager telling Forbes magazine that 2/3 of his income comes
from the sale of tools to his downline. While the typical response from
Amway distributors is that this includes income from his other investments
and enterprises, I've yet to see any evidence of this, and I've never seen
any statement from Yager claiming that Forbes incorrectly reported what
he said and meant. The meaning of the quote, when viewed in context, seems
clear enough to me, and the quotes from Gregory and Marsh support my interpretation:

------------------------------start quote----------------------------

Amway is not a pyramid, an FTC judge ruled in 1979. But some of
it's independent distributors apparently have turned their groups into
pyramidlike operations. Known as "black hats," these middlemen push their
recruits to consume Amway goods, skip the retailing and buy large amounts
of non-Amway peripherals (tapes, books, suits, jewels and even tickets
to motivational rallies.)

Dexter Yager, for example, from Rome, N.Y., is a distributor whose "downliners"--distributors
downstream, who generate commissions for him--account for perhaps a third
of Amway's direct-sales volume. He guesses his non-Amway tape-book-rally
business brings two-thirds of his annual income--roughly $1.5 million.
But, despite his being named, along with Amway and other defendants, in
a lawsuit charging abusive sales practices, he insists that he has never
coerced anyone into buying anything. "I'm just a free enterpriser who has
built one of the largest organizations in the country ," he says.

But the non-Amway items count for a lot. Says Don Gregory, Van Andel's
former speechwriter, "Recruits are brainwashed into spending a fortune
on peripherals while consuming Amway products. They either lose their shirts
or begin making money by getting enough people underneath to do the same.
"

A company official says that about 35% of its products are consumed
by the sellers themselves. But Charlie Marsh, one of Amway's ten largest
distributors, says roughly 60% of his volume is consumed by his own sales
force. And he thinks he's doing more actual retailing than anyone else.

Critics of the operation say DeVos and Van Andel failed to crack down
hard enough on the black hats and that now they have trouble controlling
them because they account for maybe half of the business. "A distributor
shakeout years ago would have helped Amway," says Noel Black, a 14-year
executive who recently left as head of international public affairs. "But
they have yet to throw out any major distributor who is violating the rules."

Will Amway clean house? There are signs that it may. "I do not wish
to control your actions, your day-to- day work, but I don't want anybody
else out in the field controlling them for you either," DeVos has told
distributors. "I need your help, folks. We must clean it up." Will a different
Amway make the same old profits? Ah, that is even less clear.--"Cleaning
Up?" Forbes 3/25/85

An earlier consulting job was for Bill Britt, in Durham NC, for
you who don't know him, he's a VERY LARGE Amway Distributor. I wrote the
SOAR Order/Entry,Inventory Control Package for them, still being used by
a lot of Amway Distributors. While working for Bill, we were NOT allowed
to become Distributors.....because we 'knew' things that most distributors
didn't know....such as MOST of Bills money comes from Tapes and Books,
not from Amway! By running it 'like' a religion there was a level of control
that ran contrary to my nature. P.S., after working for them for over three
and a half years, I saw few if ANY new distributors make it in the business....I
personally would never become a distributor, but for those of you that
have, good luck, ( let me know when you retire....if I keep saying that
one day someone will ...yeah, right )

* The fact that Quorum charges for it's training tapes a fraction of
what Yager and Britt charge for theirs. Some Amway distributors have claimed
that Quorum "subsidizes" its tapes, but they have no evidence of that whatsoever,
and Quorum distributors have responded that this is not so. It's been shown
in some detail on the alt.business.multi- level Usenet newsgroup what the
cost of producing the tapes really is, which puts the lie to the claims
that Yager and Britt, who own their own production facilities, are selling
their tapes at cost.

* Three years before that Forbes article, Phil Kerns, in his 1982 book
"Fake It 'Til You Make It," also describes how he learned that the real
money in Amway was being made from selling promotional tools. Kerns had
already written a book prior to being recruited into Amway (his book on
the People's Temple, which he came to realize was similar in some respects
to Amway). Apparently his upline was eager for him to write pro-Amway books
to be sold at rallies, and as a result Kerns had access to people and information
that most distributors don't. Unfortunately for his upline, Kerns couldn't
quit check his ethics at the door and got out when he figured out what
was going on. Here are some excerpts from his book. Kerns did not use real
names in the book, except for his own, of course. He does say that the
rallies were held in Portland, Oregon, that "Mark" was an Emerald Direct
and "Lester Cannon" was a Crown Direct and an ABA board member.

The issue in this book is not the Corporation and not SOAP, but rather
distributors who have a mission and a hope, a dream. Their mission is to
sponsor others, and their hope and dream is to build a financial empire.
To many of the distributors, no price is too great to pay in order to achieve
this mission and this dream. One will discover in reading through these
pages that there is, indeed, a price to be paid- -to a "hidden" business
carefully concealed behind the infrastructure of Amway's hierarchy. It
is a multi-million dollar enterprise, cleverly designed and fueled by excitement
and hero worship.

Some have said that this "ghost" system of "non-Amway" produced materials
has created a massive surge of grabby avariciousness from many of the top
leaders, much more today than ever before. Other distributors complain
that this selfishness is destroying the credibility of their own businesses,
and they feel that if this display of outlandish coveting continues, it
may inevitably destroy their own personal enterprises.

Page 14

As soon as Mark closed the door, he focused his gaze towards me. Then,
and very much the same way that he would open a sermon, he threw his arms
outright and began to exclaim.

"Phil, you must become a Direct Distributor before September! Don't
get me wrong. You're doing a great job, but you are going to have to sponsor
a lot more people into this business if you want to make it! Lester Cannon
wants you to be the guest speaker at his convention this fall. There will
probably be over 15,000 people present. Can you imagine that? As an author,
just think of all the money you'll make selling your books! You will need
a semitrailer full of books to accommodate this crowd!" (Not until much
later did realize the full impact of his emphasis on selling books.)

Our eyes remained riveted on Mark as he stormed back and forth across
the room delivering his message.

"Phil, you have to be there! You won't believe this mob. They are the
wildest and most excited group of people you will ever witness in your
entire life. When Lester stand up and commands them to go to the back of
the room and buy books, they obey!. It's crazy, but it's foolproof. It's
simple. You'll walk out of that convention with a suitcase full of money.!"

"Man, they'll fill their arms full with books. They'll buy them by the
case and run home to give them to their friends, downlines and anyone even
remotely interested in the business."

"Listen to me, Phil! Last year I walked out of Lester's convention with
two briefcases full of money from selling motivational books. I made over
$100,000 in cash in one night. We're talking about 'megabucks.' You can
do the same thing. I'm counting on you now.

Page 38 [describing events at a Portland rally] Mark obliged and together
we hurried downstairs. It was a simple matter for Mark, since he was a
star speaker, to introduce me to everyone and thus allow me the privilege
of complete freedom all around the platform as well as backstage.

Now leaning on the stage, I had a bird's eye view of everything. I could
hear the various Diamonds in another room arguing about who was going to
get what share of the booty from this event. I watched Tom's wife, Debbie
Anne Kenney, scurry back and forth with proceeds from the ticket sales.
She was stacking money upon a table and seeking the assistance of others
to count it. Most of the tickets, I was told, were sold prior to this particular
event. However, tickets could still be purchased at the gates.

It was, indeed, a very interesting evening. Up on stage there was much
talk of villas, cruises, expensive cars, banking practices and upcoming
events. In the hallways, tables were heaped full of tapes, books and lots
of American memorabilia. Events similar to this could go on all day and
all weekend. Were there spinoffs? You bet. The record breaking ticket sales,
catered dinners, books and cassettes were just a few. Others include soft
drinks, hot dogs, calendars and even bumper stickers. At some of these
events, it was not uncommon to see additional spinoffs such as the sale
of suits, jewels and automobiles. All of these were considered "tools of
the trade"--even custom-tailored suits. Whoever sponsored the event was
like any well- schooled promoter. He would make certain that he profited
from absolutely everything, if possible, sold at this event.

My thoughts came back to my own business. As the meeting continued in
the auditorium, I went upstairs to question Mark as he supervised the sale
of hundreds of books and tape packets.

"Mark, when I continually sponsor and don't retail as you have instructed,
I don't make any profit. But tonight the light has really dawned on me.
I have invited all my downlines to this event, and they will probably pay
the asking price of $39 for your tape packet and purchase a myriad of motivational
books, not to mention the admission fee, all of which will benefit no one
except those putting on this gig, right?"

I did not receive a response. Mark has a unique way of ignoring a person
when he want to but can keep right on smiling as he does. Mark was now
autographing motivational packets. After a few moments he finally backed
away from the table. He reached out and draped his arm across my shoulders.
With a squeezy clasp and a smile, Mark led me across the hall to the stadium
entryway. Thousands were crammed into the stadium singing, "God Bless America."

Together we stood and watched this spectacle. Hundreds now stood, many
holding hands, and some swaying to the song's cadence.

"Look, Phil, they're happy. Just Look! That's what counts. You want
to take that away from them?"

I couldn't believe my ears. I turned and solemnly walked away from my
sponsor. My wife was waiting down the hall, and together we left this event
in Portland, very disillusioned. Already we had spent hundreds of dollars
on rallies and seminars prior to this particular "Free Enterprise Day."
Well, it wasn't free. We weren't equals. Those who organized this event
would walk away with their attache cases full of cash, just as they had
previously predicted. The sponsors of these events almost always insist
that tickets be paid in cash only. At many events I have seen doormen ask
that checks be made out to "cash." No receipts are given.

I was now convinced how my uplines perceived this business. It was a
colossal plan aimed to appeal only to selfishness and carnality: the obsession
of money and things, regardless of the price. Their briefcases full of
money was sufficient evidence of that.

Our zeal was gone. We were now uncertain about our future in this business.
I assured my wife that our friends and family members were more important
than all the money in the world. Besides, the Amway business, as we were
instructed to conduct it, was showing us little or no profit. This evening
was additional proof that the big money, indeed, was being made by a very
select few, and not by selling soap.

Later we learned that many times these events were scheduled to be held
concurrently with a function being offered by the Amway Corporation--the
same date and the same city. The hosts would urge their downlines to attend
_their_ rally rather than the Amway sponsored event.

Were the leaders really wanting to motivate these people, or were they
wanting these individuals to spend money for their own profit? I felt I
had already seen enough. Certainly over the months I had witnessed, unknowingly,
millions of dollars being cleverly siphoned away from thousands of unsuspecting
Amway distributors.

Forbes credits Kerns' book with inspiring the "60 Minutes" and "Donahue"
shows examining Amway, and of generally causing no end of bad publicity
for Amway. Despite this, Amway never took Kerns to court, something it
certainly had the money to do.

* From the "60 Minutes" segment on Amway: "Beyond that [expenses associated
with attending rallies], people who want to make it in Amway are told to
buy the books and tapes and other motivating tools that will teach them
how to do it. The market in these items runs into millions of dollars a
year, and that cash goes not to the Amway Corporation, but to the high
level distributors who run the rallies, paid for by the hopeful Amway novices
who come to those rallies by the thousands.

* While I've heard many Amway distributors deny that anyone profits
from moving the tapes through their downlines, other distributors (more
honest, or perhaps just high up enough in the food chain to have been given
a cut of the action) have stated otherwise. The following was posted some
time ago on Prodigy by an ex-Pearl direct from Britt's group. He's one
of several distributors I've met who had been successful at building their
businesses, but left because they were disgusted by the sleazy practices
the witnessed. This particular fellow said he called it quits after he
found out his upline diamond was picking up some extra bucks selling phony
Rolex watches to his downline.

You said that a tape costs you about 5.00 and that you "reinvest" $25.00/mo.
back into your business. It looks to me like you are on the Tape of the
week program. Lets look at a few interesring numbers. I think a Crown will
have a minimum of 10,000 active people in their business. People like Yaeger
or Britt the number is closer to 100,000. That is a conservative number
Im sure. HMMMM!!Lets see now. tapes sell for 5.00 I wonder how much they
cost to produce. If you have a hi volume it costs less than 2.00 to produce.
Therefore it looks like there is a profit of at least 3.00 on each tape.
Lets say I have 100,000 active people ordering 5 tapes a month. I believe
thats an income of around $300,000/mo. It seems to me that its much better
to be in the tools business than the soap business doesnt it??? Do you
have any idea how much these guys make off a large rallie like Free Enterprise
day??? Work some of the numbers Patrick. What do you think your upline
makes when they have a weekend seminar???? Usually they charge about 200-300.00.
Those functions are very profitable. Heck The speakers alone get paid 4,000-7,000.
You see Patrick if you make Diamond, there are some organizations where
you will make an extra 100,000/yr just in speaking engagements for other
groups on the circuit. Now Im not saying its bad to make that kind of money
doing something but lets not fool ourselves into thinking its a soap business
OK?????

Ive watched your posts on all the subjects about your upline not making
a dime off of the tapes and fucntions etc. And I am going to tell you for
the third time that that is not the truth. When I was a direct in Amway
I made $1.00 on every tape my upline Diamond pushed through my organization
and I bought my rally tickets to sell to my group at far less than what
my distributors paid for them. My directs made money off the tapes that
went through thier personal group. Pat WAKE UP. Your statement is not based
on the truth. Why pay 5.00 for a tape from your upline when you can buy
a great motivational tape from Amway corp for about half the price????
Most Diamonds would prefer that you buy the tapes from them instead of
the company. HMMM I wonder why????

(ex AMWAY Pearl Direct))

Jim

The truth is that there is a profit on the "tools" moved thru the organization.
Also in most organizations that profit starts getting passed out a the
direct level by the upline diamond. For someone on this board to state
that "no profit is being made on tools" is an outright lie. This paticular
issue is one of the big reasons that This MLM has got a poor reputation.
( the curiosity approach is the biggest reason). Rather than be oblivious
to this FACT why not learn to acknowledge it and be prepared to give the
reasons why its OK with you. The honest approach is better in my humble
opinion.

(ex Amway Pearl direct)

P.S. The more some of the posters on this BB try to BS the people about
this"Tools" thing, the more you will hear from me as to just what the truth
is. As you can probably tell by now it is a real sore subject with me.
Alot of people get hurt by this stuff.

Another distributor posted the following on Genie. This fellow got to
Silver Producer, but also left rather than be a part of what he felt were
unethical practices. He's still a distributor, but pays someone else to
support his downline until they make direct.

----------------------------start quote------------------------------

> Obviously, someone is making money.....but not from the sale
> of products. The "tools" are the biggest money maker in this
> business.

Right you are ! In my upline support organization, they figure that
about 1/2 their net is from over-ride bonuses and 1/2 is from selling their
support tapes. This is for diamonds of course, but the Emeralds in our
group also sell a fair amount of tapes.

This can be a complete conversation in itself .. and I've not the time.
Anyone care to take the ball from here?

And here are yet more comments from ex-distributors whose witnessed
first-hand how the tools business really works:

----------------------------start quote------------------------------

Once upon a time, long ago in a far away galaxy, I was an Amway distributor.
It so happened that my sponcer and his upline were a VERY short line under
Amways top dog distributer. It so happened that I also was well liked and
pampered by these "royal" figures. Now, I don't know about you but I will
tell you this, I had a quick change of heart after attending several of
the typical rah-rah rallies and so called family reunions and was "invited"
back stage at the close of one of these deals. I personally assited some
very big named diamonds carry suit cases full of cash to the trunks of
their cars. The source of the cash? Ticket sales to the events, cash only
if you please. Book, tape and even motivational music tapes, cash only,
if you please. Now being the enquiring little sould I was I asked how come,
what for and why. First after being instructed to NEVER EVER question the
activities of my upline I was told that I too would experience such weatlh
if I were to hustle just a little bit more. And of course, let's not all
forget the famous saying, "Well, ain't it great!!!" Funny thing is the
goal posts keep getting moved back on you when you know or have seen "too"
much.

I might ad that I was also told that not many persons realize that the
big guns really don't make all that much from their direct sponcering and
organizational efforts. Yes, I have seen the copies of the checks and the
real ones at that and it is simply more than the average Joe makes a month.
But the deal was that the real money was made once you were invited to
join the speaking tours, split the cash profits from the rallies and their
book and tape sales. Now, I know there are going to be flames comming out
of my screen tomarrow. That's cool too. I know the real deal and that is
all that is important. I found the important road was to become a networker
not just another employee of such and such a company. Take care and good
luck.

Dream on. Don't believe everything you hear at the rallies. I'm
not going to go into this again - but I guarantee you that there are those
in your upline getting $ from the tapes you buy. Maybe one day when *you*
hit a higher jewel your *upline* will deem you worthy of their *priveledged
knowledge* of how to make some side $ from other things than the sales
of Amway products - and hopefully when that day comes your integrity will
be high enough to call it quits (you wouldn't be the first to do it, unfotunately
many don't quit but rather join the underhanded practices.)

Unlike you, I have listend to *both* Amway and Quorum tapes and I can
tell you (as well as many others can tell you) that the information found
on Quorum tapes is just as good if not better than the sob stories found
on Amway tapes. Just because amway tapes cost $5/tape and Quorum tapes
only cost $0.80/tape does not mean that the information found on Amway
tapes is 8 or 9 times better than that found on Quorum tapes - all it means
is that Quorum cares for it's distributors growth rather than for lining
of upline distributor's pockets with the sale of inflated tapes.

I was in Amway for a few years, and like many others I wised up to the
practices I saw. Once I hit the 4000 level and then the Silver level (right
before I quit) I was lucky enough to be invited to the 'hush hush meetings"
and what I saw really made me sick. Not only wasn't I making much money,
but I found out why! That's right - tape sales lining upline's pockets,
etc. Yes, I did learn a lot while I was in Amway, and yes the concept of
Amway is a fundamentally sound one, unfortunately many of the leaders are
their practices are not.

Further to our recent telecon re: "The Amway Network Business" I am
writing to you to highlight some of the problems I encountered having been
in the business for a period of four years and reaching a level of 21%,
and also meeting several people at the highest level.

When I was first introduced to the Network and shown how the business
worked, I was lead to believe that it would only take a few hours of my
spare time to build, and cost next to nothing (15 pounds) to get started.
In reality once you became involved you because pressurised to PURCHASE
books and tapes and attend all the meetings the length and breadth of the
country.

The money made from the books and tapes and meetings went to the people
at the top of the Network, which is where most of the money is made in
the Network.

While I was in the Amway Network Business, I personally knew of four
couples who had got into serious financial difficulties due to the burden
of having to buy books and tapes and attend all the meetings to the point
of losing their homes. There were also several couples who got divorced
due to the nature of the business.

In conclusion I would like to say that this Network Business is an elaborate
con designed to take advantage of genuine people who would like a business
of their own, but in reality are only controlled and manipulated by the
head of the Network.

* The Detroit Free Press did a series of articles on Amway back in 1982,
including this one that focused mainly the hidden tools business.

-----------------------------start quote-----------------------------

"Motivation Has A Price At Amway," Detroit Free Press 10/26/82

"Beyond anything else, you've got to have a winning attitude, and your
attitude can't be dependent on the facts. The facts never count. The most
important thing is your attitude"--Amway super salesman Dexter Yager.

In Amway, the right attitude doesn't come cheaply. It is packaged and
sold, just like Amway's soap powder, to a network of sales distributors
across the country.

All that is required for success, the message promises, is to believe.
But first the message must be bought.

Positive thinking flows from books and seminars and rallies where top
distributors testify about their success. The promoters sell seats in the
hall and tape-record the speeches for later sale in a nationwide chain
of inspiration. Even Amway founders Rich Devos and Jay Van Andel exhortations
can be had on tape for $1.95.

Keeping dreams of success alive--in the face of small earnings that
are the fate of most Amway distributors- -is making some high-level distributors
and motivators rich. In a pyramid inside a pyramid, low-level distributors
buy packaged inspiration from those at the top.

In one case, according to the Internal Revenue Service, a special tax
audit turned up one Amway promoter who sold $1 million worth of tape-recorded
speeches and seminars in a year. Many distributors build a substantial
second business by selling tapes and books produced outside Amway.

Lonie Lamb, 32, or Shawnee, Okla., who left Amway last August after
climbing several steps in the hierarchy, said one Amway distributor he
personally brought into the network now grosses about $20,000 a month.

"He makes about $4,000 to $6,000 from Amway and about $14,000 a month
from tapes and rallies," said Lamb, who now works form a competing direct
sales company, Olde Worlde Inc.

Amway distributors who drop out of the business speak ruefully of spending
hundreds of dollars on attending motivational seminars and hundreds of
hours listening to tape-recorded advice without ever making any money from
selling Amway products.

Amway estimated in 1979 that distributors held 5,000 motivational meeting
in the United States each week, in addition to recruiting meetings.

"You can make a lot of money _on_ the business, but not _from_ the business,"
said Dave Crowe, 38, a former high-level Amway distributor who left Amway
in 1977 after 7-1/2 years to join Olde Worlde.

Olde Worlde, based in North Carolina, was founded by former high-level
Amway distributors Ken and Carol Mackovic, who hoped to make more money
running their own company. Olde Worlde, which attracts many former Amway
distributors, doesn't hold Amway-type rallies and says it doesn't tapes
as vigorously as Amway does.

"Some of the bigger people...really make their money from the multitudes
of people who are in Amway, not from the Amway (sales) plan," said Crowe,
who made half his $70,000 Amway income from selling tapes and from fees
for telling his story at motivational rallies.

SPREADING THE DREAM

People in the direct-selling business, including some Amway competitors,
say the cost of a mass-produced tape is between 45 cents and $1, since
speakers get no royalty fees. In fact, speeches given at rallies years
ago are still being sold by Amway distributors for $3 to $4, with high-level
distributors splitting the profit as the tapes move down the pyramid.

Besides perpetuating the dream, the speakers tell jokes about their
own troubles getting started in Amway, recite stories that illustrate perseverance
in the face of adversity, and give tips on how to recruit others.

In one recorded speech, Cherry Meadows, a high-level distributor from
Nashville, Tenn., offers pointers on how a woman can help out in the Amway
business. The undated tape recording is still being sold.

She describes how she once recruited a grocery store manager by offering
him a business opportunity but refusing to give him any details.

"I just looked up at him, real innocent, batted my big baby blues and
said 'it's his (her husband Jerry's) business; you'll just have to talk
to him about it," Cherry told the audience at a rally.

"And girls, that works. You don't have to have all the answers. You
don't have to be real sharp and sophisticated. Just look dumb."

Distributors are told to listen to cassette tapes in every spare moment,
especially while driving. The way the people at the top tell it, the tapes
are a basic ingredient of Amway success.

Skip Ross, an Ohio distributor and a favorite Amway success story, in
a tape-recorded speech in March 1977, told how he rose to the top: "I controlled
my environment. I never watched a television program. I never listened
to a radio. I never read a newspaper. I never read a magazine. I never
listened to a negative conversation for 18 months. I spent a minimum of
an hour and a half a day reading the books, listening to the tapes and
thinking positive kind of thoughts. In that 18-month period my life was
totally revolutionized."

"STINKING THINKING"

As it is true in any sales organization, where the greatest threat lies
in becoming discouraged, positive thinking plays an important role in Amway.
Distributors are repeatedly told to ignore the rejection that inevitably
comes with the territory.

Speakers at Amway rallies--whose words are recorded for resale--praise
the Amway system, caution against "stinking thinking," praise God and Jesus,
encourage distributors to have faith even when they're not making any money,
and ridicule those who drop out of Amway, branding them as losers.

Rallies and speeches are intended to spur distributors to work harder
in the face of the overwhelming odds of failure. Half of those who join
Amway each year quit, although that turnover rate is low by comparison
to other direct-sales companies, the Federal Trade Commission found in
1979.

For every 400 people who pay $71.95 for a sales kit and become distributors,
only one will make it up the first step of the Amway hierarchy to direct
distributor, the Federal Trade Commission found after an investigation
that concluded Amway is not an illegal pyramid scheme. From there, a distributor
moves through ranks designated by gemstones--ruby, pearl, emerald, diamond--
to the pinnacle of crown ambassador.

Each higher rank entitles a distributor to bigger commissions and other
rewards such as expense-paid foreign vacations.

For the quarter of one percent of Amway distributors who become direct
distributors, the average monthly commission at that level is only $621,
Amway Corp. said. This is in addition to profit from selling products.

"When a man's worked hard for three or four or five months, two to five
nights a week, and he's only making 40 bucks or $100 a month, you've got
to have a rally to keep him in the business," said Lamb, the former Amway
distributor from Oklahoma.

RALLIES A TRADEMARK

Such meetings have been a feature of Amway since it was founded in 1959
by Van Andel and Devos, today chairman and president respectively. They
are still the sole owners of the business, with headquarters and a manufacturing
plant in Ada, Mich.

Since the beginning, Amway has held conventions for distributors in
nearby Grand Rapids. These conventions have grown so large that Amway bought,
renovated and expanded the old Pantlind Hotel (now the Amway Grand Plaza)
in Grand Rapids to accommodate the thousands who regularly flock into town.

In recent years, high-level distributors have gotten into the act as
well, organizing their own rallies and selling their own sales aids independently
of the corporation. Since 1971, some distributors have held the Free Enterprise
Day rallies to celebrate Amway and the system that allowed it to flourish.

Other rallies organized by distributors go by the names of Dream Night,
Moving-Up Seminar, Leadership Weekend and Family Reunion. Distributors--as
many as 15,000 at a time--pay as much as $15 to $27 apiece for a combination
pep rally, revival meeting and sales seminar--a weekend of song, prayer
and success stories told by Amway "stars."

Bob Keefe, 38, and his wife Mary Kaye, 31, successful Amway distributors
from Lapeer, think of the monthly rallies they attend as vacations. "It
always helps to be with positive people," said Bob.

Dave Crowe, the Olde Worlde distributor, agreed motivational rallies
are important, but said the Amway rallies sometimes became silly.

Though the rallies frequently lasted until the early morning, most distributors
remain in their seats, alert and cheerful to the end. At one rally, Crowe
and his wife, Martha, attended in Charlotte, N.C., distributors joined
in chanting "Five to six / Nights a week," referring to how often they
would try to recruit new distributors.

"Here's doctors, lawyers, professional people--unbelievable--mature
adults standing there saying 'Five to six / Nights a week' at 2 o'clock
in the morning, he recalled.

The next morning, distributors, bleary-eyed from too little sleep, greeted
each other in the hotel coffee shop by saying "five to six nights a week"
instead of "good morning," Crowe added. "There were lots of strange things.
Some of those things I didn't do."

ONE COUPLE WHO QUIT

Michael and Angelea DeAngelis of West Bloomfield threw themselves wholeheartedly
into Amway when they joined last October, and spent $3,000 attending rallies
that their sponsor told them would help them succeed.

After about six months, they stopped trying to sell products or recruit
others because they were selling less than $100 worth of products each
month. They were spending 40 ours or more a week between them on Amway,
leaving no time to spend with their sons, Michael, 2-1/2, and Christian,
5-1/2.

Michael, 31, and electrical contractor, called a halt to attending rallies
because he figured their purpose was to distract members from the fact
that "you don't even have Las Vegas odds" in the Amway system.

He also resented the star system, which holds successful Amway distributors
up for emulation.

"It was like masters and slaves," said Michael. "There are all these
people who are never going to make it. They are going to try so hard, but
eventually, they are going to drop out. And up above them you have a few
successful people."

The pressure to buy tapes of those rally speeches is intense, many active
and former distributors told the Free Press.

MOTIVATION

Fred Harris, a double diamond distributor from Harrisburg, Pa., told
one rally that to build the Amway business, a distributor must read at
least one chapter form a motivational book and listen to one tape every
day, and attend one seminar a month.

What if you're interested, but your spouse won't cooperate? Read the
book out loud so he can't avoid hearing them, advised Cherry Meadows, the
distributor from Nashville, in a tape recorded at a rally last Jan. 1.
"If he won't listen to the tapes, play them at the dinner table."

Distributors are encouraged to sign up for a tape-of-the-week program
under which they automatically receive a new tape every seven days from
higher-level distributors. The DeAngelis couple spent about $250 on 70
tapes during their six months in Amway.

Amway Corp. sells speeches by the highest-level distributors and by
founders Devos and Van Andel on cassette tapes for $1.95 each. Titles now
include "Try or Cry," "The Wishmores and the Havemores," and "Millionaires
Success Formula," described in an Amway catalog as "how to make money,
presented (by Van Andel) in easily-remembered concise fashion and illustrated
with humorous stories, serious examples and relevant quotes from the classics."

The tapes are meant to keep alive the dreams that distributors cultivate
by pasting on their refrigerators pictures of cars, vacations spots and
other goals.

"How would you like to make 10 times what your local banker makes?"
high-ranking distributor Bill Britt of Durham, N.C., says on a tape produced
independently of Amway. "I make more money than any lawyer I know. I make
more money than any professional I know."

AVOIDING MISTAKES

Bob Keefe, the emerald distributor from Lapeer, said the tapes are a
valuable way for a new Amway distributor to learn how to build a business.

"There are two ways of learning," he said in an interview. "One is by
experience, where you learn from your own personal mistakes. The other
is you learn by wisdom, where you learn by the experiences of other people.
What the tapes do, they provide an opportunity to listen and learn and
avoid making mistakes."

But they do more than that. The tapes exhort distributors to keep the
faith, even when they're not making money, and they label distributors
losers if they think of quitting.

"It's just incredible the mind control they use," said a disillusioned
Julie Greenwood, of Wisconsin, who was an Amway distributor for three years.
"They get you listening to these tapes every day, and the tapes don't really
talk about Amway. What they talk about is losers and winners...And when
you start hearing this every day...you start thinking, wow, if I don't
do this, I'm going to be a loser."

By the time the Greenwoods finally left Amway last February on the advice
of a marriage counselor, to save their marriage, they had lost $8,000 and
all their spare time for the previous three years.

"I got away from the tapes and I got away form the brainwashing of the
whole thing," Julie said. "And I started to realize what we were doing...
I started to say to Bill, 'What have we been doing?...Nothing but work
for three years."

* According to a recent three-part article on Yager in the Charlotte
Observer, things don't seem to have changed much since the Detroit Free
Press article. Following is the second part of that series, which appeared
on 3/20/95.

INSPIRING AMWAY SALES IS GOAL; CRITICS QUESTION THE MESSAGE, PROFITS
SECOND OF THREE PARTS

The hub of Dexter Yager's worldwide empire is a bustling factory on
South Boulevard.

The factory doesn't produce Amway soaps or cleaners. It cranks out millions
of motivational tapes each year for the Charlotte-based Amway magnate's
network of distributors.

Within its red-brick walls, Yager's positive-thinking message is captured
in cassettes. Dream big. Be "persistent and consistent.'' Avoid "stinking
thinking.''

The tapes are the linchpin in the Yager family's motivation-building
enterprise called Internet Services Corp. The $35 million-a-year spin-
off of Yager's Amway business generates consistent profits and persistent
problems.

Yager's network of 1 million distributors -- Amway's largest -- provides
a ready-made market for the Yager motivation sideline. Yager says his "support
system'' strengthens Amway sales, but ex- distributors argue that its central
focus is selling to the sales force.

Some Amway dropouts say the Yager system's psychological impact is more
subtle. They say it promotes some practices that seem to conflict with
official Amway policies. And the endless stream of motivation aids keeps
marginal salespeople believing -- in the face of poor results -- that success
is just around the bend.

"The tapes and books kept me brainwashed,'' said Bruce Roeser of Stone
Mountain, Ga., who spent 13 years in Yager's Amway network. "They get you
in his frame of mind that you need to feed on the materials in order to
survive.''

Roeser said the barrage of motivation aids put him "in a performance
trap'' where he obsessed about achieving, but felt mired in failure.

"It's like trying to put together a white picture puzzle,'' he said.
"You're always missing the critical piece and it's always something else
you have to buy.''

Roeser said he spent $30,000 on tapes, books and rallies before dropping
out of Amway and filing bankruptcy in 1992.

Roeser received weekly tapes from Charlotte.

Each week, tens of thousands of Yager distributors pay $5 or more for
the featured audiocassette. The tape-of-the-week is shipped to 50 states
and 10 foreign countries.

The Yager family's Internet has prospered through the sales of such
motivational tools. Its tapes, videos, books, pamphlets, elaborately staged
rallies and a fledgling satellite network comprise an integrated system
that's unrivaled in other Amway networks called downlines.

"We're very proactive in developing methods to grow the business,''
said Doyle Yager, 36, Dexter's son and chief executive officer of Internet.

"Each of us are what we are because of what we think,'' said Henry Gilewicz
of Lake Wylie. "Books and people will shape your life.''

Dexter Yager said his Amway and Internet businesses give him an income
of "several million'' a year. He said he makes more from Amway sales than
Internet profits, but stays too busy to track his income.

Yager calls Internet "a very successful venture.''

But a Pennsylvania lawsuit by former Amway distributors calls it "a
pyramid-type scheme'' that has "coerced'' thousands of Amway recruits into
purchasing marginally useful materials.

And the Yager sideline stirs questions among consumer advocates who
monitor multilevel marketing businesses. Multilevel marketing involves
layers of salespeople who recruit others and earn a commission on their
recruits' sales. It's a legal business technique that can be abused.

Linda Golodner, executive director of the National Consumers League,
said people in direct sales usually can't afford many extra expenses.

"There are certainly books on the market on how to be effective and
they don't cost $5 a week,'' she said. "It sounds like Mr. Yager has made
a lot and he's forgetting these people who are in need of extra money to
make ends meet.''

EARNINGS MUST BE DISCLOSED

David Kirkman, an assistant N.C. attorney general, said he's received
no complaints about Internet and can't comment on its practices.

But he said consumers should look closely at the costs before they involve
themselves in multilevel marketing businesses.

"It's a form of investment and all investments have risks,'' he said.
"You need to evaluate them as best you can.''

N.C. law prohibits pyramid schemes, businesses that focus on recruiting
large numbers of salespeople and coerce them into buying costly inventory
and sales aids. If a company gouges its sales force with such practices
as "inventory loading,'' said Kirkman, it may cross the line from a legal
multilevel marketing business to a pyramid.

The Federal Trade Commission ruled in 1979 that Amway is not a pyramid
because it sells retail products.

But a few years later, the FTC ordered the corporation to disclose earnings
information to new recruits. The company's sales and marketing plan shows
that the average active distributor -- about 46% are deemed active -- makes
$65 a month.

Five former distributors sued Yager, his companies, a key operative,
and the Amway Corp. last year, contending that they were misled about the
costs, profitability, and chances of succeeding in Amway.

The class-action lawsuit could potentially involve thousands of former
distributors, court papers say. The suit is pending in Philadelphia.

The ex-distributors portray the Yager network as a maverick in the Amway
world. They contend that its leaders promote consuming Amway products over
selling them, that they place motivation above sales training and encourage
the use of subterfuge to recruit people.

Such tactics seem to go against the grain of some Amway Corp. policies,
they say.

Amway's policies say distributors should sell to 10 retail customers
a month and should not use deception in recruiting.

Ex-distributors in Yager's network say no one encouraged them to develop
customers and that they were trained to invite people to meetings without
telling them the meetings were Amway presentations.

Two earlier lawsuits, filed in Ohio in 1984 and Washington in 1985,
also accused Yager's network of badgering distributors to purchase motivational
tools. The suits were settled under agreements that kept the terms secret.

"I settled nothing with those people,'' said Yager. "I got out.''

Bill Britt, a mega-distributor in Yager's downline who produces his
own motivation materials, was also sued. Britt, a former Chapel Hill resident,
lives in Florida and declined comment through his lawyer.

"Since I'm one of the largest distributors, I get sued,'' Yager said.
"Most times, most people blame somebody else for their failure.''

OBJECTIONS RAISED TO TAPES

John and Stacy Hanrahan of Springfield, Pa., filed the Pennsylvania
suit after telling a television news show last year that selling Amway
cost them financially and almost broke up their marriage.

They contend that Yager and Britt have violated price-fixing laws by
dividing up the huge motivational "tools'' market among themselves. They
charge that virtually all of the 1 million distributors in Yager's downline
buy motivational materials from either Yager or Britt.

The couple said ex-Amway distributors who saw them on TV flooded them
with calls and letters, saying they spent far more money on tapes, books
and rallies than they made selling Amway. They cited intense pressure to
buy from their "upline'' sponsors.

Stacy Hanrahan said the ex-distributors seem particularly incensed about
spending money on the tape-of- the-week, though it was just one of many
costs they incurred in Amway.

"Someone chooses the tape and you get it whether you want it or not,''
she said. "We're finding that they aren't wanted, that we're receiving
many from former distributors that are still in wrappings.''

Hanrahan said the tapes offer little sales training and include some
material she finds objectionable, including "condescending'' references
to women and the non-Amway work world.

She said ex-distributors believed that their sponsors would take their
business, or refuse to help them expand it, if they didn't buy the "tools.''

"They'd say, If you don't support us, we won't support you,' '' she
said.

What made the threats so potent was the relationship that sponsors develop
with their recruits, she explained. New distributors are encouraged to
bring their marital and other personal problems to their Amway higher-up
and defer to their "counseling.''

The "upline'' becomes the lifeline to success, she said. And the upline
usually profits on the motivational materials.

"The real money's being made with the tapes,'' John Hanrahan said. "To
me, it's extortion.''

"I have never coerced anybody to buy anything that I made money on,''
said Dexter Yager.

TAPES HELPED, YAGER SAYS

The 55-year-old multimillionaire said he became interested in motivation
because he needed a boost when he first began selling Amway 31 years ago.
He said he experienced an initial flurry of business before he hit several
years of uneven results.

"My first three years in the business I never read a positive-thinking
book. I never listened to a tape,'' he said.

"I was dealing with big dreams one day and discouragement the next,''
he said. "And I didn't know how to get it together.''

Yager said it helped him to read positive-thinking books. In the 1970s,
he began selling them to his network. Then he began writing his own books
-- he's produced 12 -- and recording his speeches.

In 1980, he and his family formed a corporation called Freedom Distributing.
It became Internet Services Corp. in 1989 and by that time, three of Yager's
seven children -- Doyle, Jeff and Steve -- were running it.

Yager spends most of his time traveling and speaking to his network's
distributors while his sons run the family's Charlotte businesses.

Doyle's the CEO, Jeff's president and Steve vice president of Internet,
which operates in a large complex on Steele Creek Road.

But the real hive of activity is at Intercontinental Communication Corp.
of America, the division of Internet that records speeches, duplicates
tapes, and has begun developing satellite programming.

Located at 4447 South Blvd., ICCA employs about 120 people and operates
24 hours a day, said Harrell Canning, vice president. Most of its work
is Yager-related but it handles non-Amway contracts as well.

On a recent workday, the 18,000-square-foot production floor was buzzing
with workers checking tape reels, monitoring sound quality and packing
boxes of finished cassettes. Snippets of speeches filled the air and a
cassette titled "We Need a Burning Desire'' rolled off the production line.

Most of the tapes are speeches by "Diamonds'' and other high-ranking
Amway distributors. Canning said ICCA regularly records speeches at Yager
sales meetings for cassette release.

In turn, the rallies are a lucrative vehicle for selling the finished
cassettes, videos, books and other Yager items.

The Yagers stage several major rallies yearly -- including "Free Enterprise
Day'' events in Atlanta and Salt Lake City that have drawn crowds of 80,000
or more in recent years -- as well as smaller sales meetings.

Doyle said the company puts on about 18 events yearly.

Tickets to the large weekend events can cost as much as $100. They usually
showcase a politically conservative speaker -- George Bush and Ronald Reagan
have appeared in recent years -- as well as Amway speakers and country
music.

Diana Lackey, a former Internet employee who helped staff some rallies,
said certain books and tapes were heavily promoted during the shows, resulting
in flurries of sales at merchandise tables. She said people would often
buy $200 and $300 of tapes at a time.

Sales were so brisk, she said, that the Monday after the rallies, key
Internet employees would lock themselves in a conference room all day to
count cash.

Lackey said she worked at Internet more than four years, keeping records
on audiocassette orders and sales. She said Internet paid ICCA 55 cents
to duplicate each tape.

The tapes were sold to "Diamonds'' for varying prices -- usually $1
to $2 apiece, she said. But by the time they got to the newest recruits,
the price had jumped to $5.

More than 200 new Internet tapes were released yearly and millions of
tapes changed hands, she said.

Lackey, 26, said she was fired from Internet last September after a
supervisor accused her of disloyalty.

"I don't know that much about it,'' said Doyle Yager of Lackey's firing.
"I don't remember exactly what the reason was; I thought it was lack of
performance.''

Jeff Yager said Internet's costs of producing tapes are higher than
55 cents a cassette because they include overhead as well as raw materials.

"Sure you make money. You have to to stay in business,'' he said, adding
that $5 a tape is a reasonable price.

Tom Eggleston, chief operating officer of Amway Corp., said the corporation
has no problem with the Yagers' motivation sideline.

"We are satisfied that the retail selling price is competitive with
similar training materials in the marketplace and delivers good value for
distributors,'' he said.

Eggleston said the corporation reviews many Internet training materials
and cassette tapes "to assure that they fairly and accurately depict the
earnings potential and other aspects of the business.''

He said Amway has emphasized that purchase of such materials is voluntary.

But many former Yager network distributors told The Observer that they
could not withstand unrelenting pressure to buy them.

Some said they were urged to run up big credit-card bills if necessary
to purchase materials and attend rallies.

Roger Maynard, 39, of Dallas said he dropped out of Amway last year
after three years as a distributor. He said he spent almost $5,000 on Amway
products and motivational materials, but got little financial return.

He said he asked his sponsor if he could listen to the sponsor's tapes,
but the distributor instructed him to buy his own.

"He said you don't have to buy the tapes and go to the meetings, but
the people that were successful did,'' he said. "They said some people
sold their TVs to go to rallies.''

Another former distributor, Arthur Bouchard of Pawtucket, R.I., said,
"They tell you that the tapes, books and seminars are optional, but so
is success.''

Bouchard, 43, said he built a network of 39 people, but still couldn't
support himself with Amway. He said he piled up debts of $10,000 during
his four years in the business and filed bankruptcy last year after dropping
out.

He said the tapes didn't help him build his business because they contained
no information on selling. Mostly, he said, they were speeches recorded
at rallies.

"Dexter throws a good party, but there's nothing to learn there.''

Roeser, the former distributor from Georgia, said he recently threw
out about 400 tapes and other motivational materials left from his Amway
days, hauling away six filled garbage bags.

"I think Dexter had the right idea with the communications system,''
he said. "It just started getting so profitable that it became a self-
perpetuating animal.''
----------------------------end quote------------------------------

* Around the same time as the Detroit Free Press article appeared, the
state of Wisconsin was investigating Amway. It was to find that Amway distributors
were regularly lying about their incomes. (An examination of the actual
tax returns of all Amway distributors in the state over a period of two
years revealed that the average income of all Direct Distributors was a
NET LOSS of $918 per year.) The following is one of a number of letters
that was sent to the Wisconsin DA's office during that investigation.

-----------------------------start quote-----------------------------

Letter to Wisconsin state AG Bronson La Follette, in response to announcement
of state's investigation into Amway, received 8/82.

Dear Sir,

Recently I read an article in the St. Paul Pioneer Press on this Amway
problem. In January of this year I got into the Amway business. After about
two thousand dollars worth of tapes, books, products, etc. I finally figured
out this whole thing was a scam.

What the article stated was about what was happening in our "leg" of
Amway. They drastically misrepresented what could be achieved in the plan
they showed, short of a life and death situation.

I'm writing this letter to find out who I should contact to find out
if this "leg" is legitimate or not, in my area.

I also would be interested in recovering the money I invested in tapes,
books, and expenses over the last several months.

I showed the plan to a few people before I realized that this was a
scam. I would like to know what I could do to get out of this Amway business
before I get in trouble, too. One of the people I got involved is John
****, a cousin of mine. He also woke up to the fact that this was a scam
after he had sold his guns, truck, etc. to try and get the business of
Amway going.

This is happening to a number of people in my area and it bothers me
that our state can let such a thing happen. I would be interested in knowing
if the state could send someone over and investigate this problem. Thank
you for your time.
------------------------------end quote-------------------------------

* I know of at least five civil lawsuits that were filed by Amway distributors
who were lied to about how the big money is really made in Amway, and were
coerced into throwing away money on large amounts of unneccesary motivational
tools. For details on these cases, see the Lawsuits
page.

There are some (but not all) of my reasons for believing that Bill Britt,
Dexter Yager, and other Amway high rollers are making most of their money
selling motivational tools rather than Amway products.

In my opinion the fact that the data from a number of independent sources
is highly corroborative, not to mention the sheer quantity of it, indicates
to me a high probability that Britt, Yager and the other Amway "high rollers"
are making the bulk of their money milking their downlines via the coerced
sale of motivational tools.